We spoke to David Lischner, CEO of Valant Medical (www.valant.com). Valant provides a SaaS solution for practice management for psychiatrists and behavioral health professionals. Valant has been an Atlas portfolio company for many years now.

The interview was held in Valant offices in downtown Seattle. Here is the transcript:

Valant CEO: David Lischner

Krish: David, Can you give us a synopsis of your career? Was Valant your first startup?

David: No. My first startup was the group behavioral health practice (Evidence Based Treatment Centers of Seattle) . EBTCS was the first startup, even though I had a solo practice, because we decided to grow it quickly. It grew from 5 founders to 25 clinicians. Along the way in EBTCS, I had the idea of doing Valant.

Krish: What about before EBTCS? Any entrepreneurial ideas?

David: When I started in Medical School, I never expected to start a technology company. No plan to start any business. Considered it from time to time, but that was not the way my life was going. It was when I was involved in EBTCS that the instinct to start a company took hold. I started taking my ideas seriously and the idea of Valant came along the way.

Krish: Was it one moment that inspired you to start a company?

David: The drive was always there and it got rekindled when I started the practice. Years of thinking about what the next thing would be. Me and my brother talked about Valant for over a year and finally started in 2005. The original idea was a virtual office for a small clinical practice with web enabled services. A lot of what we did was medical billing. We did mostly services for practice management. In 2007, we pivoted and became a software company, in addition to also providing services.

Krish: Take us through some of the early days of starting Valant. What were some of the challenges you faced? How did you overcome them?

David: Early days are a bit of a blur. Getting customers is the biggest challenge. Once you get customers, figuring out how to make them happy. Next – figuring out how to be profitable.

Earlier on, we had the wrong business model and it was hard to sell. The idea of whole new way of running one’s practice with software tools combined a big concept and a small concept and was a hard sell. We ended up selling to customers that were hard to service and not profitable.

At a personal level, I was working two full time jobs. Pushing the rock over and over again up the hill without a breakthrough was the hard part. We realized a year into it that we had to change and pivoted two years from the original start. We raised fees, shrunk the business and went from 20 to 9 customers. Six months after that we decided to focus exclusively on software. From that moment, can’t say things have been easy, but definitely headed in the right direction. Hardest decision was to raise the fees.

Krish: What was the inspiration for the product itself?

David: There were a couple of experiences. I had pharma reps, sales reps come and keep knocking on my door in practice. But no one showed up to improve my practice efficiency. I also had a couple of people working for me. I used to encrypt my own notes in Word. Had no idea if that was the right way to do, but did not want to have paper charts. I thought there had to be a better way. At one point, I lost the 2 people that worked for me. That exacerbated my situation. I went and looked for solutions out there, but really found nothing. That’s where the impetus for Valant came from.

Krish: What was the difference between starting the group practice and the software practice?

David: Patients are plenty, but customers are not. Challenges were very different. Practice was local. Scaling issues were different. EBTCS is a lifestyle business. Mission and business objectives were very different.

Krish: What do you think is the most difficult phase of a startup and why?

Is it forming the team?

Is it raising capital?

Is it making sense of the market opportunity?

David: c. A super angel once showed me a graph that had a “trough of disillusionment”. You are in this transition and you know something is not working. You have fantasies of getting out, but you need to keep going. Raising capital is hard work. Customers are hard work. Building a team is hard work.

Krish: Take us through a typical day for David Lischner

David: I get in early enough to manage my email and then in meetings all day. Meetings for Leadership, product team, partners, customers and depending on what’s going on with other stakeholders – investors, legal etc. In between these meetings, I have to make decisions. At least a few decisions need to be made every day. Things that don’t get decided in the office get decided after my 5 year old goes to sleep. There is usually one overriding priority or theme for a week (financing, product, team etc). It helps me give structure to what I am doing. It will be my touchstone and I return to that often. I need to keep reminding myself of that theme. There are always priorities behind that theme. Even if everything else gets sacrificed, I know I still got something done and that keeps the organization going.

Krish: Do you socialize the theme with your team?

David: Depends, if I think it would be useful to the team. The team always knows what its priorities are. There is standups everyday – leadership standups and each team has its own standup. It comes from Rockefeller method, but we don’t strictly follow it. It keeps everyone in lock step. It is extra time but keeps us all efficient. There is lot of friction and tension in the standup but very little misunderstanding after that, which makes for an efficient team.

Krish: 20 hr days or 14 hr days or…

David: All over the map. When I am travelling, it makes for longer days. With a 5 year old, it gives me more structure when I am in town.

Krish: One classic conundrum for startups is that you can’t go out and sell too much until you have built a product that can scale and be reliable. To build scale and be reliable, you need money. How do you manage this scenario?

David: We have raised money. We were fortunate to have a gifted founding technologist in my brother. He was productive by himself as a team. That enabled us to punch above our weight for a long time. When we needed to, we did get outside financing. We are very capital efficient and do amazing things with limited resources. Financing has been crucial. We have been doubling our sales, revenue and customer base but that does not mean we are not re-factoring or improving the product constantly.

Krish: You are lucky to have a gifted technologist. What advice do you give for startups that don’t have that situation?

David: I would say to a domain expert to make sure they have a strong technology partner if you can’t find a tech co-founder. Make sure that the technology partner has the same level of intensity and commitment as a co-founder would have.

Krish: Can you share any seminal moments in your startup experience?

David: There was some time where sales outstripped product. We had 300 or so customers at that time. We had a multi system failure; we thought we had decent redundancy for the scale of our business. It resulted in data loss and we convened all hands on deck with everyone working hard to fix things and manually restoring data. What we thought was an existential threat, somehow we survived. We lost just 1 customer, who had just started that month. That scared us, inspired us to reprioritize, make big investments in redundancy, monitoring, alerting, disaster recovery and failover until we were able to sleep at night. We were quite aggressive in communicating with our customers. Our organization responded in a way that kind of shaped us forever and that is a moment we can refer to and made us stronger. It is corny, but nobody blamed anyone and we all took responsibility for it and every single person in the org did their best to improve things. Our customers saw that. We knew we messed up and we had failed. They trusted we were going to fix things and never let that happen again. We are much stronger due to this. It is a kind of touchstone in the organization as to how we treated each other and how we handled adversity. It made the organization more resilient.

Krish: What are some of the key trends that you see emerging in Healthcare IT?

David: Mobile is obvious one. Mobile is a way of extending care beyond the office. Mobile implies tools for patient and tools for communication and tools for capturing useful data, wherever the patient is. The start is capturing outcome data outside of the appointment. In behavioral health care, what is missing in the field is capturing any outcomes. Once you capture the data, what do you do with it? There are opportunities for extending it by the provider and use in the face to face interaction. Outcomes based care is a trend in healthcare and I think technology enables it.

Krish: Give me an example– Are you talking about monitoring patient behavior outside the appointment? Are you building technology for that?

David: We already have platform to capture outcomes data through patient questionnaire. That is different than automated monitoring. That is likely the next step. But, this is a huge first step. Patients and providers need to be bought in. A lot of consumer facing health technology has not taken off due to little provider involvement. Patients tend to largely trust and do what providers ask them to do, a lot. So, patients will use the tools if providers have a stake and providers see it as a tool that will help measure and improve outcomes. This has not yet had an impact in practice of behavior healthcare, but will soon. The captured outcomes data from the patient ends up in the clinical note narrative and by doing so, the patient is more engaged and helping out in the task of documentation and this relieves the burden of inputting data for the provider. This is a way everyone wins. Patients are engaged, submitting outcomes data and clinician has easy way of getting that outcomes data and by tracking that data over time, can drive improvements in outcomes. There is plenty of evidence that just measuring outcomes will improve the quality of care. That is a huge first step.

Beyond that, care opportunities, clinical decision support and Analytics will be the next wave for providers

Krish: There is a common misconception that clinicians do not like to measure outcomes.

David: There is resistance in some circles. The main thing keeping behavioral health care providers from measuring outcomes is that it is burdensome across the board. If you can create a system for capturing it and if that relieves the administrative burden, they welcome it. The buzzword in behavioral health care is measurement based care or outcome based care.

Krish: How is Valant doing? What are big priorities for you in 2013?

David: Very well. We doubled customer base in 2012. Did over $1m in sales last quarter, doubled the team. We successfully entered the large practice market. For 2013, we want to continue progress in large practice market, continue steady growth in small practice market. We are also intentionally entering the solo therapist market. That will be the long tail for our business. For product , we have the platform called Mobile Notes (on any device or browser). We will also build features that will appeal to large practice customers.

Krish: Some buzzer round questions

David:

Favorite Recent Movie: Long time since I saw one, but wife liked Argo

Favorite Food: Mediterranean

Favorite Vacation Spot: Hawaii

Favorite Sport: Soccer

Favorite App: NY Times

Krish: Thanks David for the interview and sharing your story, startup experiences and your insight on the industry. Good luck to the Valant team in attaining your goals for 2013.